On The Internet, A Penny Is Nothing To Sneeze At

Transcript

RENEE MONTAGNE, HOST:

Our Planet Money team this week is taking a look at the lowly penny. People discard pennies in bowls by cash registers. They walk by them on the street without a thought of picking them up. In fact, a lot of us don't even pick them up when we drop them. NPR's David Kestenbaum reports that there is one place where people think pennies could really cause some change.

DAVID KESTENBAUM, BYLINE: What if, as you were surfing around the Internet, there was a way to send really small amounts of money to the people who make things you like - all those cat videos, recipes, blog posts, news stories. In the early days of the Internet, people thought this idea of micropayments was going to be one of the ways the Internet paid for itself.

Some programmers at Digital Equipment Corporation actually worked on it back in 1997. Did it have a secret code name, this project?

RUSS JONES: It was always called millicent. M-I-L-L-I-C-E-N-T.

KESTENBAUM: This is Russ Jones, who was part of the team. What was the smallest amount you imagined someone paying with the system?

JONES: We were designing the system so that you could do transactions down to a penny.

KESTENBAUM: It turns out it can be expensive to send pennies around the Internet. If you wanted to pay a penny using a credit card, he says, it could cost you 30 cents to send that one cent.

The MilliCent solution was to add up all the small change people would be sending around, and pay it to each recipients in a lump.

Russ Jones said they did a small test run, gave a bunch of people 10 bucks to spend and signed up businesses. One guy charged people 25 cents to play a virtual guitar - this was early Internet days, remember. The Oxford English Dictionary sold definitions for one penny. And it worked. But there was this one side effect - it subtly changed the nature of surfing the Web. People were used to getting stuff for free. They did not like paying, even small amounts.

JONES: One of the things we found out was that is people would get as aggravated when something went wrong with a five cent purchase as when something went wrong in the real they world with a $50 purchase.

KESTENBAUM: Really? Like that wasn't the word I meant to look up in Oxford English Dictionary.

JONES: Yeah, yeah. So it's like, you know, I accidentally keyed in the wrong word. And I just lost my penny. I want my money back.

(LAUGHTER)

KESTENBAUM: MilliCent never made it out of the lab. The Internet took a different path. People got paid by sticking ads on their sites, or charging subscription fees.

But the idea of pennies is back again. The Internet seems to be changing. People are buying stuff for small amounts - a game for your phone for two bucks, a song for 99 cents. So why not pennies? A big venture capital firm in Silicon Valley is into the idea and people are trying to make it work again.

LINUS OLSSON: Oh, I think it can change. It would probably be the biggest change since the occurrence of the Internet.

KESTENBAUM: This is Linus Olsson, co-founder and CEO of an online payment system called FLATTR. FLATTR tries to get around that problem that MilliCent had - of turning Web surfing into an unpleasant shopping trip. FLATTR makes paying voluntary, like a tip. Basically you load up your FLATTR account with however much money you want to give away in a month - say, 10 bucks or whatever. Then if you see an article or a cat video you like, you click on a little FLATTR button. At the end of the month, everyone you FLATTRed flattered splits the money you set aside.

OLSSON: Actually at the system right now can do fractions of cents.

KESTENBAUM: Fractions of a penny.

OLSSON: That's how it works right now. So it will be one cent in the future.

(LAUGHTER)

KESTENBAUM: So make the case that a penny is worth something.

OLSSON: Yeah, it's worth something if there are a lot of people. It does the same thing. So we have this thing that when you sing that is a Swedish saying: (Foreign language spoken)

KESTENBAUM: And it means what?

OLSSON: And it would translate to many small streams forms a large river.

KESTENBAUM: Olson says people are using FLATTR. A lot of folks in Germany signed up.

OLSSON: We have a podcaster who make his living form this. I think he gets like $5,000 or something.

KESTENBAUM: A month?

OLSSON: Yeah.

KESTENBAUM: OK.

A penny can actually can be a lot in the online world. If you try to earn money by putting ads on your Website, you get a little bit for every person who comes to your site. How little? If one person sees an ad, you might get 1/1000th or 1/100th of one penny. So a whole penny, one cent? From that perspective it is worth picking up from the sidewalk.

David Kestenbaum, NPR News. Transcript provided by NPR, Copyright NPR.